Yes, an approved gratuity fund is exempt from tax under Section 21 and Part I of the Second Schedule of the Income Tax Ordinance, 2001.
Any payments received by an employee from such a fund are also exempt from income tax.
The interest or profit earned within the approved gratuity fund remains tax-free as long as it is retained in the fund.
However, if the fund is not approved by the Commissioner Inland Revenue, exemptions are not available.
